Brent hits five-year low below $66 on oversupply worries

SHAFAQNA – Benchmark Brent crude slipped on Tuesday to its lowest in five years, dropping below $66 a barrel after plunging more than 4 percent the day before on worries of a swelling supply glut.

Oil prices are likely to remain around $65 a barrel for the next six or seven months, the chief of Kuwait’s national oil company said on Monday, in the latest sign that Gulf producers are ready to ride out plunging prices.

Brent crude for January delivery hit an intraday low of $65.33 on Tuesday, its lowest since September 2009. It was trading down 77 cents at $65.42 by 0457 GMT (11:57 p.m. EST).

“Although talks of oil reaching its bottom are more rampant, we fail to see a reversal coming without stronger fundamentals,” said Daniel Ang of Phillip Futures in a note, adding that Brent crude for February delivery could fall as low as $60.

Asian markets were mostly in the red on Tuesday while the U.S. dollar began to edge higher once again, aided by a media report the Federal Reserve might take a rhetorical step toward tightening at its meeting next week.

China’s yuan was heading on Tuesday for its largest single-day drop against the dollar since 2008.

Brent dropped $2.88 on Monday, to settle at $66.19 a barrel, its third-largest one-day loss this year.

Brent has fallen more than 40 percent since June, with losses growing in late November after the Organization of the Petroleum Exporting Countries (OPEC) decided not to cut its output target.

Since then, top oil exporter Saudi Arabia has cut monthly prices for the crude it sells the United States and Asia, a move that analysts say shows it is stepping up its battle for market share.

U.S. crude fell 56 cents to $62.49 a barrel on Tuesday, after briefly hitting $62.25, its lowest since July 2009. It dropped 4.2 percent, or $2.79, to end Monday at $63.05.

“Short term sentiment is to remain weak for crude oil, given the oversupply expected in 2015,” ANZ analysts said in a note.

It remains to be seen when the price slump will slow the U.S. shale boom. New U.S. projections show production from the big three U.S. shale plays should carry on growing at more than 100,000 barrels per day into January.

However, many companies are already starting to make deep cuts to spending for next year.